Fiscal Compact referendum – review of the week

Just 11 more days to go before polling day on 31^st May and the debate on the Fiscal Compact is certainly generating a lot of light and heat. Here’s a review of the past week.

The economics
The debate as to whether the Fiscal Compact will mandate more austerity continues, with the “no” side still maintaining that the reduction in the structural deficit from 3.5% in 2015 to 0.5% will mean a further €6bn of austerity. This is disputed by the “yes” camp and probably the most enlightening article during the week was Seamus Coffey’s setting out the numbers and challenging the “no” camp. The position on here tends to agree with the “yes” camp in that there will be an adjustment but it is likely that economic growth and reform will do the heavy lifting, and in any event, the existing rules require us to get to a structural deficit of 0.5% and it makes sense generally that in the long-term, we live within our means.

Citigroup came out on Friday last and said that even if Ireland rejects the Fiscal Compact ““we believe a second program would be forthcoming if requested, probably initially without private sector involvement unless the Irish government itself insisted that PSI is needed, which is unlikely in our view”

We did seem to get a straight answer from Minister Noonan during the week which confirmed that the EFSF would be available for new and additional loan applications up to June 2013.

The politics
The “yes” side comprise 80%-plus of the Dail so numbers alone indicate they will make the most gaffes, and this week there have been a few, from An Taoiseach Enda Kenny’s awkward encounters in Athlone, to Minister for Enterprise Jobs and Innovation Richard Bruton saying, and then retracting, that Ireland would vote again if the first referendum returned a “no” and we were faced with no other funding option, to Minister for Finance Michael Noonan whose “feta cheese” comments indicated a frivolousness and insensitivity to the economic situation in Greece and by implication overall, but that was probably unfair since the minister was talking to an international audience and he was trying to illustrate in simple terms the limited economic ties between Ireland and Greece. Several Independent TDs have yet to declare their position, notably Shane Ross and Mattie McGrath. Deputy Ross tried to introduce a Bill which would allow the referendum to be deferred but that was torpedoed by a Government seemingly obsessed with the notion of confidence and certainty. True to his word, Fianna Fail deputy, Eamon O’Cuiv has kept schtumm on his opposition to the Fiscal Compact but you can still read in detail his reasoning for his opposition here.

Opinion polls and betting

 

Last Sunday’s Red C poll certainly gave a boost to the “yes” side but two polls during the week, indicated a slight weakening in the “yes” vote though it still remains dominant. It is a curiosity on here that Red C does not count the “wont vote” category and it was indicated in last Friday’s Red C poll that “just under two thirds of the population (59%) claim they will definitely vote in the referendum at the end of this month.” So it would seem on here that there is still everything to play for with convincing the “undecideds” and “wont votes”. Red C’s Irish competitor, Millward Lansdowne Browne produced its own poll during the week which significant diverged from the Red C poll in indicating only 4% “wont vote” and 35% “undecided” compared with Red C’s 16%. Younger voters 18-24 appear to be most undecided. Here’s the history of polls

Paddy Power has gone on a roller coaster in its odds offered on the referendum outcome. Last Sunday it raised the odds of a “yes” from 8/15 to 1/5 and raised the odds even further during the week before reducing the odds back to 1/5 which is the present pricing.

The view from outside the Pressure Cooker
There is still little coverage internationally on the Irish referendum which is seen as a side show because the Fiscal Compact will come into effect once 12 of the 16 ratify it, and so far only Greece has fully ratified the Compact with Slovenia, Portugal and Poland having given parliamentary approval but are awaiting presidential assent. But that leaves 14 more EuroZone countries and seven EU non-EuroZone countries. A “no” vote in Ireland is still seen as contributing to a negative odour in Europe. Francois Hollande assumed power inFrance this week and seems to be maintaining his rhetoric in insisting on changes to the Fiscal Compact. Will Germany bend?

Endorsements
Declan Ganley and the Libertas Institute colourfully joined the campaign on Monday last, advocating a “no” vote and stealing limelight during the week with graphic posters and provocative debates. The Campaign against Household and Water Taxes advocated a “no” vote. The Dublin Chamber of Commerce and brother of Fine Gael’s referendum campaign director, Patrick Coveney advocates a “yes” vote as does any chamber throughout the country that I am aware of  – the overwhelming majority of the business community expressing a view on the referendum continue to advocate a “yes” vote, which it claims will underpin confidence which will protect and attract investment.